THE Reserve Bank of Zimbabwe (RBZ) says year-on-year credit to the private sector declined by 8,4% to $3,52 billion, as banks practised “cautionary lending” to curb the high default rates that had afflicted the sector. BY TATIRA ZWINOIRA
Source: Credit to private sector down 8,4% – NewsDay Zimbabwe December 7, 2016
The non-performing loans ratio reached a peak of 20,45% in 2014, necessitating the creation of the Zimbabwe Asset Management Company to buy bad debts from the banking sector.
In an economic review report for September, the RBZ said this was the seventh year-on-year decline since March.
“During the period under review, year-on-year credit to the private sector declined by 8,4% to $3,52bn in September 2016, from $3,84bn in September 2015. This was a seventh consecutive year-on-year decline since March 2016. The decline in credit to the private sector was, in large part, on the back of cautionary lending by banks,” the central bank
The report said the distribution of credit to the private sector was 84,99% in loans and advances, mortgages (9,92%), and other investments (5%).
The bills discounted for the period under review were 0,09%.
“There was no significant issuance of Bankers Acceptances (BAs) during the month under review, as banks continue to be risk averse, on the back of tight liquidity challenges,” RBZ said.
Analysts said the absence of the BAs indicate the lack of liquidity in the market.
A BA is a promised future payment, which is accepted and guaranteed by a bank and drawn on a deposit at the bank.
This payment specifies the amount of money, the date, and the person to whom the payment is due.
Liquidity has been increasingly difficult of late due to lack of revenue generation and ballooning imports.
In recent weeks, the central bank has been playing a juggling act in trying to adequately allocate foreign currency to the fuel and cooking oil disrtibutors and manufacturers, who depend on imported raw materials.
Despite the continued decline of private sector credit, RBZ said on a month-on-month basis, credit to the private sector increased by 0,94% to $3,52bn in the month under review from $3,48bn in August.
“Banking sector credit recorded an annual increase of 14,14%, from $5 106,78 million in September 2015 to $5 829,10m in September 2016. On a month-on-month basis, banking sector credit grew by 1,32%, from $5 753,42 million recorded in the previous month,” RBZ said.
Liquidity is being drained by imports of goods and services which take 82%, capital remittances (14%), income payments (2%), and the remainder going to illicit financial flows.
The RBZ report said cash transactions stood at $515,36 million in September 2016, a 5% increase from $ 491,19m recorded in the previous month owing to increased cash demand.